(CNN) – When Michelle Gass took over as CEO of Kohl in 2018, she tried to be creative to bring more buyers into stores.
The company had just struck a deal with Amazon the previous year to allow customers to bring their returns to selected Kohl locations. The hope was that the business would attract younger consumers, who would then stay there and buy. Kohl’s expanded the partnership to all stores during the management of Gass and she said in November that she was “satisfied” with the program.
Kohl’s has tried several other approaches to attract customers in recent years, including expanding its range of sportswear and renting space in a handful of stores for Planet Fitness and Aldi.
These efforts were not enough to drive away activist investors, who now want to shake things up.
An activist group, which includes Macellum Advisors, Ancora Holdings, Legion Partners Asset Management and 4010 Capital LLC, said Monday that it had acquired a 9.5% stake in Kohl’s and appointed nine new members to its board of directors. The news, first reported by the Wall Street Journal, caused Kohl’s shares to rise 8% in Monday’s trading session.
Their efforts come as traditional department stores have been squeezed in recent years by Amazon and online brands, big stores like Target and discount clothing chains like TJMaxx. The pandemic forced department stores to close temporarily and affected pedestrian traffic in stores. JCPenney and Neiman Marcus filed for bankruptcy in May.
The activist group has had some success in the past. In 2019, he made a similar effort at Bed Bath & Beyond. This network renewed its board and installed a new CEO in response.
The group said in a 27-page letter to Kohl’s investors on Monday that it is pushing for changes at Kohl’s because the department store chain’s share price is “chronically underperforming” compared to competitors. In the past decade, Kohl’s has lost market share, sales have stagnated and profit margins have shrunk, the group noted.
These issues started before the pandemic, the group said. Kohl’s operating margin fell from 11.5% in 2011 to 6.1% in 2019, while sales stabilized over the period. The group pointed to “repetitive and overly varied” merchandise, “disappointing new brand launches” and “private label failure” for contributing to Kohl’s slow sales. He also said that the deal with Amazon was “expensive” for Kohl’s and that Kohl’s did not share “detailed program information” with investors.
A Kohl spokesman said in a statement that the company has been in talks with the investor group since December and “remains open to hearing new ideas”. The company said it is confident that a new strategy, outlined in October, will “accelerate growth and profitability”.
The strategy requires Kohl’s to expand its selection of sportswear and outdoor products, create a larger beauty business and improve its women’s clothing business. Kohl’s said that since the strategy was announced, seven Wall Street analysts have increased their shares and the share price has grown by more than 150%.
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